Super grid in a big flap

Regulators fear further delays for electric competition

October 21, 2001|By Dan Thanh Dang | Dan Thanh Dang,SUN STAFF

Fear that the nightmare scenario of spiking electricity prices, debt-ridden utilities and rolling blackouts that roiled California could afflict the Northeast, including Maryland, is prompting state regulators to dig in their heels against a federal order to merge three power grids into one super network.

The Maryland Public Service Commission is threatening to sue the Federal Energy Regulatory Commission because the massive effort to transform the electric grid is moving ahead without careful examination and cost benefit analysis, and largely without public scrutiny, the PSC says.

What was supposed to be a voluntary effort to form a Northeast regional transmission organization (RTO), state regulators complained, has become a federally mandated mediation process among 400 stakeholders with conflicting interests. The result would hijack states' control of electricity reliability standards and could prove costly, harm system reliability and delay competition in deregulated states, the commission warned.

"I know you and others are saying that this is not a process we chose, but we decided to hop on the train or get hit by it," PSC Chairman Catherine I. Riley told representatives from local utilities and power suppliers during a recent hearing on the Super RTO. "Well, we - Maryland, D.C. and Virginia - are standing in front of that train.

"We are being subjected to a potential level of risk that we wouldn't choose on our own," Riley said. "The stakes are very high."

Like its counterparts in neighboring states, the PSC said it was blindsided by the July 12 FERC order to create four mammoth RTOs governing electricity flow in the Northeast, Southeast, Midwest and West. By connecting smaller grids into a super network, the transmission of power from region to region will improve, increase competition and lower prices, FERC said.

The Maryland PSC - joined by the commissions in Virginia and the District of Columbia - filed a motion in August for a stay and rehearing of FERC's mandate. FERC, which is holding a series of workshops on RTOs this week, has yet to respond.

1992 deregulation

The RTO concept grew out of the Federal Energy Policy Act of 1992, which deregulated the wholesale electricity market. With that law, FERC opened up access to the nation's grid and directed states to adopt policies leading to increased competition between energy companies. But utilities that owned both wires and power plants often denied access to their lines to prevent other electricity suppliers from competing with them.

State regulators took FERC to court, arguing that the government went too far when it ordered utilities to open their power lines to competitors. The U.S. Supreme Court is expected to issue a decision next year.

Then in a landmark order issued in December 1999, FERC required all utilities that own, operate or control interstate electric transmission to file by Oct. 15, 2000, a proposal to create or join a regional transmission organization. FERC also advised utilities to voluntarily surrender control of their transmission systems to grid organizations that would manage power flow across regions and run daily power transactions.

Several utilities balked and took FERC to court. That case is still winding its way through U.S. District Court.

Despite challenges to two key orders on the transmission system, FERC proceeded on July 12 to order utilities, power suppliers and regulators to begin confidential mediation talks to create a Northeast RTO that would take control of the grid to serve as impartial coordinators. FERC gave them 45 days to come up with a business plan.

Many said they participated despite their concerns.

"If FERC was moving forward, we felt it was in our best interest to participate," said Kenneth W. DeFontes Jr., vice president of electric transmission and distribution for Baltimore Gas and Electric Co., which supports the creation of a Super RTO, but with various conditions. Like many utilities across the country, BGE could be ordered to give up its transmission lines to the Super RTO - a scenario that most utilities object to vociferously. BGE has already turned its power plants over to a nonregulated affiliate.

Some participated with confidence that the process will work out in the end.

"We understand that [Maryland and the other commissions] have some concerns, but we are hopeful that we can work together with FERC and our fellow states to make sure reliability issues are addressed," said Tom Charles, spokesman for the Pennsylvania Public Utility Commission, which did not join Maryland's request for a stay. "We are focused on making sure the system works the way we want it to. "

While FERC officials won't comment on Maryland's request for a stay, FERC spokeswoman Barbara Connors said, "when the commission issued its July order, they said that the Northeast is indeed a single geographic market that would facilitate a better RTO market and better transmission of electric power."